Decision Analysis and Risk Management Decision Making: Issues and Methods

This paper provides an overview of decision analysis and its use in risk management decision making. The paper discusses the distinctive characteristics of decision analysis and compares these characteristics with those of its principal alternative—cost–benefit analysis. The paper also discusses each of the steps in a decision analysis and the strengths and limitations of the method.     

Intergenerational Risk Decision Making: A Practical Example

There is no such thing as intergenerational decision making, at least not yet. In fact, there is no such thing as intragenerational decision making in the context of maximizing overall social good given resource limitations, there are just decisions being made in an ad hoc fashion. Even if one assumes that there is such a thing as intragenerational decision making, no uniform standard or guidance exists to make societal decisions for the common good. Risks to society are judged unevenly within the same agency and across agencies. Decisions are made in isolation and not weighed in the societal context of what is intra or intergenerationally important. The National Academy of Public Administration (NAPA) has set forth a framework for intergenerational decision making that provides a consistent and fair basis for making tough decisions in order to address difficult issues such as the long-term disposal of nuclear wastes. NAPA recognizes that there is an intergenerational obligation that must encompass broader questions than the narrow issue of waste disposal since resources are finite and needs are great. The fundamental principles are based on sustainability with the overarching objective that "no generation should needlessly, now or in the future, deprive its successors of the opportunity to enjoy a quality of life equivalent to its own." Coupled with this objective are four supporting principles of trusteeship, sustainability, chain of obligation, and precaution. The NAPA process also recognizes that no decision can be final and that a "rolling future" view is better than making decisions for "all time." It attempts to balance the needs of the present with those of the future in an open and transparent process that is aimed at producing a decision, not just endless analysis. The U.S. Congress and president should develop a rational standard by which to judge laws that involve intra and intergenerational issues relative to the overall societal good. Present regulations need to be evaluated relative to a uniform level of risk and benefit to assess where the limited money available can do the most good for both the present and future generations in the context of NAPA sustainability principles. It is hoped that decision makers will take a serious look at this process since it can work to resolve stakeholder stalemate.     

风险理论反思与领导决策风险应对

风险的不确定性和恐惧的普遍性都对传统的政府确定性行政提出了挑战,政府正面临从确定性行政向不确定性行政的转型,这对领导干部的风险决策能力提出了新的转型要求。这种转型要求主要体现在风险决策工具的选择及其不确定性分析,对风险评估责任人的确定,对风险评估行为的监管以及风险信息的引领等方面。     

Current Directions in Risk Research: New Developments in Psychology and Sociology

This article reviews the main approaches to risk in psychology and sociology and considers recent developments. It shows that research continues from a wide range of perspectives. Some developments in psychological thinking have recently acknowledged the importance of the cultural framing of risk perceptions and responses and the positive power of emotions to manage uncertainties, while some streams of work in sociology have moved toward more individualist approaches. These converging processes open opportunities for cross-fertilization and for using insights from both disciplines in the development of research.     

Risk Analysis, Systems Analysis, and Covey's Seven Habits

This article relates problem solving to the common approaches of the gestalt-holistic philosophies of systems analysis, risk analysis, and Stephen Covey's Seven Habits of Highly Effective People. Guiding principles developed on the basis of these philosophies provide the foundations for methodological frameworks that build on a plethora of theory, methods, tools, and techniques. Although systems analysis and risk analysis differ in their historical evolution and technical maturity, both study and solve problems using methodological frameworks that share a holistic vision.     

Decision Making,Risk and Gender: Are Managers Different?

This paper explores differences in the nature of decisions taken by males and females. Women are playing an increasingly important role in business management and managers are ultimately tested and evaluated in terms of their success in making decisions. Consequently any difference in the character and quality of decisions taken by male and female managers will have important implications for organizations. This paper reviews the literature, and reports two pieces of empirical work which investigate the connections between gender and decision making. The decision-making characteristics of males and females in a ‘non-managerial’ population in which the majority of individuals have not undergone formal management education are contrasted with a ‘managerial’ population of potential and actual managers who have undertaken such education. It is argued that women are often excluded from managerial positions of authority and leadership due to stereotypes, which have been constructed by observing ‘non-managerial’ populations at large. The paper concludes, however, that these stereotypes may not apply to managers as in the ‘managerial’ sub-population males and females display similar risk propensity and make decisions of equal quality.     

Landslide Risk Models for Decision Making

This contribution presents a quantitative procedure for landslide risk analysis and zoning considering hazard, exposure (or value of elements at risk), and vulnerability. The method provides the means to obtain landslide risk models (expressing expected damage due to landslides on material elements and economic activities in monetary terms, according to different scenarios and periods) useful to identify areas where mitigation efforts will be most cost effective. It allows identifying priority areas for the implementation of actions to reduce vulnerability (elements) or hazard (processes). The procedure proposed can also be used as a preventive tool, through its application to strategic environmental impact analysis (SEIA) of land-use plans. The underlying hypothesis is that reliable predictions about hazard and risk can be made using models based on a detailed analysis of past landslide occurrences in connection with conditioning factors and data on past damage. The results show that the approach proposed and the hypothesis formulated are essentially correct, providing estimates of the order of magnitude of expected losses for a given time period. Uncertainties, strengths, and shortcomings of the procedure and results obtained are discussed and potential lines of research to improve the models are indicated. Finally, comments and suggestions are provided to generalize this type of analysis.     

Stochastic Dominance: An Approach to Decision Making Under Risk

This paper introduces stochastic dominance as a technique to reduce the set of possible actions that a decision maker must consider in a decision problem under risk. The procedure usually does not choose an optimal action, but instead eliminates certain actions as unacceptable. Very little need be known about the decision maker's utility function. Two possible applications are presented: upgrading buildings to better withstand an earthquake; and choosing a site for a LNG facility.     

Dangerous News: Media Decision Making about Climate Change Risk

This article explores the role of broadcast news media decision makers in shaping public understanding and debate of climate change risks. It locates the media within a "tangled web" of communication and debate between sources, media, and publics. The article draws on new qualitative research in the British context. The main body of it focuses on media source strategies, on climate change storytelling in news, and the "myth of detachment" sustained by many news decision makers. The empirical evidence, gathered between 1997 and 2004, is derived primarily from recordings and notes drawn from a series of seminars that has brought together equal numbers of BBC news and television decision makers and environment/development specialists. The seminars have created a rare space for extended dialogue between media and specialist perspectives on the communication of complex climate change science and policy. While the article acknowledges the distinctive nature of the BBC as a public sector broadcaster, the evidence confirms and extends current understanding of the career of climate change within the media more broadly. The working group discussions have explored issues arising out of how stories are sourced and, in the context of competitive and time-pressured newsrooms, shaped and presented in short news pieces. Particularly significant is the disjuncture between ways of talking about uncertainty within science and policy discourse and media constructions of objectivity, truth, and balance. The article concludes with a summary of developments in media culture, technology, and practice that are creating opportunities for enhanced public understanding and debate of climate change risks. It also indicates the need for science and policy communities to be more active critics and sources of news.     

Risk,Ambiguity, and Decision Choice: Some Additional Evidence*

This paper extends prior research by jointly assessing the roles of risk attitude and tolerance for ambiguity in predicting choice. An experiment examined the effects of these variables on decisions made in four different scenarios. The four scenarios (treatment combinations) were generated by manipulating risk and ambiguity into two levels (high and low). The context was defined in terms of a sample size selection problem. The second issue explored was the effect of attitudes toward risk and ambiguity on decision confidence. The results indicate that (1) both risk attitude and ambiguity intolerance determined choice behavior, (2) the roles of these individual attitudes depend on the levels of the two treatment variables of risk and ambiguity, (3) the presence of ambiguity accentuates the perception of risk in individual subjects, and (4) decision makers who are less risk averse, and have more tolerance for ambiguity, display greater confidence in their choice. The paper discusses some of the managerial implications of the results.     

Ethics, Decision Analysis, and Public Risk

In any analysis of a decision problem involving public risks, ethical implications are introduced. In some cases, these ethical implications may be introduced simply because an analysis is being done. Additional ethical implications may be inherently part of the methodology being utilized or introduced into the specific analysis of the decision problem. In this paper, we investigate where and how ethical implications enter when using the methodology of decision analysis to examine problems involving public risks. We conclude that the methodology of decision analysis is sufficiently robust to allow for numerous different ethical viewpoints to be accounted for in any specific analysis. Stated alternatively, decision analyses of public risks can be conducted in a manner consistent with utilitarianism, deontological theories, libertarianism, egalitarianism, and so forth. However, any specific analysis has embedded within it numerous ethical implications. This suggests that the careful ethical scrutiny of analyses involving the methodology of decision analysis should be placed on the specific application and not on the methodology per se or on the fact that an analysis is undertaken.     

Cognitive and Motivational Biases in Decision and Risk Analysis

Behavioral decision research has demonstrated that judgments and decisions of ordinary people and experts are subject to numerous biases. Decision and risk analysis were designed to improve judgments and decisions and to overcome many of these biases. However, when eliciting model components and parameters from decisionmakers or experts, analysts often face the very biases they are trying to help overcome. When these inputs are biased they can seriously reduce the quality of the model and resulting analysis. Some of these biases are due to faulty cognitive processes; some are due to motivations for preferred analysis outcomes. This article identifies the cognitive and motivational biases that are relevant for decision and risk analysis because they can distort analysis inputs and are difficult to correct. We also review and provide guidance about the existing debiasing techniques to overcome these biases. In addition, we describe some biases that are less relevant because they can be corrected by using logic or decomposing the elicitation task. We conclude the article with an agenda for future research.     

并购决策风险的评价模型及几种风险防范措施

加入WTO后,中国企业将迎来新一轮的并购浪潮,只有充分认识到并购决策的风险,多一份理性思考少一份盲动,才能避免并购陷阱.构建了企业并购风险评价的六个简单模型,提出了企业并购常见的三种风险防范措施,有助于企业在扩张的道路上迈出更坚实的步伐.     

Decision Making for Group Risk Reduction: Dealing with Epistemic Uncertainty

Group risk is usually represented by FN curves showing the frequency of different accident sizes for a given activity. Many governments regulate group risk through FN criterion lines, which define the tolerable location of an FN curve. However, to compare different risk reduction alternatives, one must be able to rank FN curves. The two main problems in doing this are that the FN curve contains multiple frequencies, and that there are usually large epistemic uncertainties about the curve. Since the mid 1970s, a number of authors have used the concept of “disutility” to summarize FN curves in which a family of disutility functions was defined with a single parameter controlling the degree of “risk aversion.” Here, we show it to be risk neutral, disaster averse, and insensitive to epistemic uncertainty on accident frequencies. A new approach is outlined that has a number of attractive properties. The formulation allows us to distinguish between risk aversion and disaster aversion, two concepts that have been confused in the literature until now. A two‐parameter family of disutilities generalizing the previous approach is defined, where one parameter controls risk aversion and the other disaster aversion. The family is sensitive to epistemic uncertainties. Such disutilities may, for example, be used to compare the impact of system design changes on group risks, or might form the basis for valuing reductions in group risk in a cost‐benefit analysis.     

Risk Attitude,Ambiguity Intolerance and Decision Making: An Exploratory Investigation*

Although recent research has identified attitudes towards ambiguity and risk to be important determinants of choice behavior [8] [18], no prior work jointly assessed the roles of both attitudes. We conducted a laboratory experiment using a real decision scenario and conducted exploratory analyses of the relationship between attitudes towards risk and ambiguity and the decision taken by the subjects. The results support the prediction that attitudes towards both risk and ambiguity affect choice behavior. Our exploratory analyses indicate interesting avenues for future research, including an examination of the decision process itself.     

The Role of Decision Analysis in Risk Analysis: A Retrospective

In commemorating the 40th anniversary of Risk Analysis, this article takes a retrospective look at some of the ways in which decision analysis (as a “sibling field”) has contributed to the development both of the journal, and of risk analysis as a field. I begin with some early foundational papers from the first decade of the journal's history. I then review a number of papers that have applied decision analysis to risk problems over the years, including applications of related methods such as influence diagrams, multicriteria decision analysis, and risk matrices. The article then reviews some recent trends, from roughly the last five years, and concludes with observations about the parallel evolution of risk analysis and decision analysis over the decades—especially with regard to the importance of representing multiple stakeholder perspectives, and the importance of behavioral realism in decision models. Overall, the extensive literature surveyed here supports the view that the incorporation of decision-analytic perspectives has improved the practice of risk analysis.